The RBI submitted that the information sought by the appellant is based on the scrutiny conducted by the RBI in exercise of its powers under Section 35(1A) of the Banking Regulation Act, 1949 (the BR Act) and disclosure of inspection reports and the information submitted to the RBI or collected by the RBI in terms of Section 27 of the BR Act would be detrimental to the interest of depositors, public and banking policies. The RBI argued that the misreading or out of context appreciation of the observations made in the inspection reports may be hazardous. The consequences may be irreversible and may result in dilution of confidence of the banking system. The adverse market reactions to such sensitive information may be phenomenal and may be of systemic risk to the economy, banks being the backbone of the economy.

The CIC disagreed with the argument of the RBI that citizens were not mature enough to understand the implications of weaknesses, and the RBI was the best judge to decide what citizens should know. Citizens, who are considered mature enough to decide on who should govern them, who give legitimacy to the government and framed the Constitution of India must be given selective information about weaknesses exposed in inspection to ensure that they have faith in the banking sector. They must see the financial and banking sector only to the extent which RBI wishes.